Zydus Cadila in talks to acquire Strides Arcolab's domestic generic business?

Zydus Cadila, India's fifth largest pharmaceutical company, is in talks to acquire Bangalore-based Strides Arcolab's domestic generic business, The Economic Times today reported, citing two people familiar with the matter.

However, Strides Arcolab denied that it was in talks to sell the business, while Zydus Cadila did not respond to an e-mail query, the paper reported.

Strides Arcolab, which in January sold off its generic drug business in Australia and Southeast Asia to New Jersey-based Watson Pharmaceuticals for A$396 million, (See: Watson acquires Strides Arcolab's Australian generic unit for Rs1,983 crore) was planning to put its domestic generics business on the block in order to focus on its core sterile injectables business. 

The sale helped the company to cut debt by $250 million and lower its debt-to-equity ratio to 0.6-0.7 from about 1.6. Strides Arcolab had total debt of Rs2,400 crore as on 30 September 2011, according to FactSet data.

Strides entered the Indian domestic market in 2007 with a range of products for diabetes, cardiovascular diseases, neurology and female healthcare through the acquisition of Chennai-based pharmaceutical company, Grandix Pharmaceuticals Limited.

In 2009, it established critical care products portfolio under a new division called Ray of Life. The critical care business catered to the high end Indian oncology, nephrology and antibiotics segment.

If the acquisition does take place despite the denial, the acquisition of Strides' Rs70-crore domestic generic business would help Ahmedabad-based Zydus get a wider range and market access in the highly competitive domestic market.

"We wish to clarify that Strides is not in discussion with anybody concerning sale of its Indian branded business," Arun Kumar, CEO of Strides Arcolab told the paper.  The Indian generics business is an important part of Strides' future strategy and the company continues to invest in its expansion, he said.